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Full text of "Annual Evaluation Report Fiscal Year 1984"

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505-2

II.    RESPONSE TO 6EPA 417(aj

A.    fr^s and Objectives

During FY 1984, the Department's principal objectives for this program were:
o To collect more defaulted loans not being pursued by the institutions.

o To encourage institutions to collect past loans more effectively and thus
nake mope loan funds available to students.

B.    Progress and Accomplishments

o Institutions turned over to the Department of Education more defaulted
loans for collection. Turning over such loans to the Department has
resulted in more effective collection of them: In FY 1983, commercial
agencies under contract to ED collected $20.0 million in defaulted loans,
an increase of 77 percent over the FY 1982 figure of $11.3 million.

o The Department strengthened "due diligence" requirements which colleges
must sieet in carrying out their collection activities.

C.    Costs, Benefits and Effectiveness

Program Scope

In FY 1983, DL volume totaled $595 million: there were approximately 674,000
borrowers. States allotted 49 percent of the FY 1984 Federal Capital Contri-
bution to private colleges and universities although they enroll only about
22 percent of all students. Private universities and four-year institutions
received 47 percent ($55.3 million) while private two-year colleges received
2 percent {$2.2 million). Public universities and four-year institutions
received 35 percent ($41.1 million) and public 2-year colleges, 2 percent
{$3.0 nil lion). Borrowers attending Proprietary schools received about 14
percent of DL capital contribution (see E.I. below).

Student Participation

During FY 1983, about 7 percent of all first-time, full-time freshmen partici-
pated in the DL program compared to about 10 percent in FY 1980. These rates
vary primarily in relation to family income; they are less correlated with
educational cost (see Table 1). In FY 1983, for example, participation
rates were highest (11.5 percent) for those in the lowest income category
(less than $10,000) and lowest (2.5 percent) for those in the highest income
group ($40,000 or more). This pattern has been consistent for many years.

The DL participants borrowed an average of $1,158 during the most recent
year. The average direct loan appears to be less strongly related to family
income and slightly more correlated with educational cost. In FY 1983, for
example, participants with family incomes of $30,000 to $39,999 had an

th!!at?A AAAXuf 71 *260 whereas those from the lowest income families (less
than $10,000) had an average loan of $1027. For all